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Institutions have been defined as ‘'the rules of the game in society, or more formally, are the humanly devised constraints that human interaction'.’ One of the most effective of these rules of interaction is the ‘'law’'. The relationship between the legal institutions and economic development has interested the academic fraternity for far too long, across the globe.

An efficient institutional structure resolves the uncertainties in the market and the problem of asymmetric information and thus, creates a positive exogeneity, ensures the efficient distribution of the resources and makes a positive impact on the functioning of the economy. It further ensures that the economic transactions are done in a cheaper and a safer way, prevents wastage of resources, contributes in prevention of corruption and ensures transparency and accountability. Hence, it can be said that a strong institutional structure increases the efficiency and quality of trade in a country.

Law is specific and compelling in nature, and may cause both, deprive individuals of rights and benefits, and also protect another individual’s rights and freedoms, or economic rights and benefits from unlawful acts. Economy is the main factor that affects the community, either positively or negatively. The close interlinkage between law and economy keeps the States standing, both, nationally and internationally.

In India, the lawmakers are gaining increasing consciousness about the importance of rule of law, in order to boost the economic development of the country. While addressing the event at Bihar Chamber of Commerce and Industry, the then Vice President, Shri Hamid Ansari had stated that the rule of law is an essential pre-requisite for economic growth and for drawing foreign investments.

However, despite realising the same, the development of the legal institutions in the country are quite at a standstill. The '‘rule of law’' is yet a fancy phrase, and transparency and accountability is a long way off.

What is the aim of the writer in writing this article?

A) To bring out the importance of law in creating a safe society

B) To highlight the importance of law in India among foreign investors

C) To prove the importance of law for the economic development of the country

D) To show the legal development in India is still at an early stage